(201) Magazine Blogs

Tuesday, March 06, 2012

Consumers who don’t think twice before buying some expensive new electronic toy or for a costly dessert at a restaurant will drive a couple blocks out of the way to save a few cents a gallon on gasoline. It’s the strange relationship we have with pump prices. It’s the one commodity whose price is posted for all to see, making comparison shopping a snap, and we notice immediately when the price goes up a penny or two.

Of course, the increase in recent weeks has been much more than a penny or two. Price increases seem to be on pause this week, but at $3.63 a gallon—that’s the Bergen-Passaic average, according to AAA—we are paying 29 cents a gallon more than a year ago $1.04 more than in March of 2009. Not surprisingly, pump prices have become a campaign issue, with President Obama’s opponents pointing out that prices have more than doubled on Obama’s watch. Around here, the average price was $1.64 on Jan. 20, 2009.

What’s forgotten is that we were paying more than $4 a gallon for the first time in history just six months earlier. Was President George W. Bush responsible for that? No more than Obama is today.

In 2008, prices rose steadily from about $2.95 a gallon on Jan. 1 to a peak of $4.008 on July 6—and even higher in other parts of the country—due largely to speculators and a growing Chinese economy. Sound familiar? Replace the Chinese economy with concern over Iranian oil and you have the two most-cited reasons for the current surge. Over the ensuing six months of 2008, however, the American economy came crashing down, taking gasoline prices with it. Pump prices bottomed out at $1.499 on Dec. 31 and began a slow climb In January 2009.

What makes the current state of affairs so unusual is that prices are going up, even as demand drops—the opposite of a cardinal rule of economics. But speculators and hedge funds seem to operate by their own rules.

What’s even more mind-boggling—especially when critics say the solution to rising prices is to drill for more oil—is that the United States is actually exporting about 1.2-million barrels of diesel fuel a day, mostly to South America, and more than 500,000 barrels a day of gasoline, mostly to South and Central America, according to Tom Kloza, chief analyst at the Oil Price Information Service in Wall.

He predicts that this spring and summer we’ll see a rise in BOTH imports and exports of gasoline because shipping rates make it easier for East Coast ports to receive European or even Mideastern gasoline than supplies shipped from Texas to New York via American flagged vessels, Kloza said.

He has predicted that the average price nationally will peak around $4.25 this spring, which would be about where they were four years earlier.

About

KEVIN DeMARRAIS has provided Record readers with straightforward advice on pocketbook and consumer issues such as telemarketers, Internet scams, supermarket coupons, unresponsive business people, and dozens of other subjects for nearly 16 years. A three-time first-place finisher in state-wide business writing contests, he combines years of personal experience with advice from experts in business and government to provide readers tools to solve their own problems and to get the most for their time and money.